Disclosure of Returns & Return Information
to Designee of Taxpayer

DEPARTMENT OF THE TREASURY
Internal Revenue Service 26 CFR Part 301 [TD 8935] RIN 1545-AY59

TITLE: Disclosure of Returns and Return Information to Designee of
Taxpayer

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Temporary regulation.

SUMMARY: This document contains a temporary regulation relating to
the disclosure of returns and return information to a designee of
the taxpayer. The temporary regulation provides guidance to IRS
employees responsible for disclosing returns and return information
and to taxpayers who wish to designate a person or persons to whom
returns and return information may be disclosed. The portion of this
temporary regulation pertaining to nonwritten requests or consents
reflects changes to the law made by the Taxpayer Bill of Rights II,
Public Law 104-168, section 1207, 110 Stat. 1473. With respect to
written requests or consents, the temporary regulation amends the
existing regulation to provide further guidance in certain limited
situations and to clarify existing procedures. The text of the
temporary regulation also serves as the text of the proposed
regulation set forth in the notice of proposed rulemaking on this
subject in the Proposed Rules section of this issue of the Federal
Register.

DATES: Effective Date: This regulation is effective January 11,
2001. Applicability Date: For dates of applicability, see
§301.6103(c)-1T(g).

FOR FURTHER INFORMATION CONTACT: Joseph Conley, (202) 622-4580 (not
a toll-free number).

Background

Under section 6103(a), returns and return information are
confidential unless disclosure is otherwise authorized by the
Internal Revenue Code. Section 6103(c), as amended by section 1207
of the Taxpayer Bill of Rights II, Public Law 104-168 (110 Stat.
1452), authorizes the IRS to disclose returns and return information
to such person or persons as the taxpayer may designate in a request
for or consent to disclosure, or to any other person at the
taxpayer's request to the extent necessary to comply with a request
for information or assistance made by the taxpayer to such other
person. Disclosure is permitted subject to such requirements and
conditions as may be prescribed by regulations. With the amendment
in 1996, Congress eliminated the longstanding requirement that
disclosures to designees of the taxpayer must be pursuant to the
written request or consent of the taxpayer. The purpose of this
amendment to section 6103(c) was to assist the IRS in developing a
paperless tax administration system that relies on, among other
things, electronic communication. H.R. Rep. No. 104-506, at 49
(1996), reprinted in 1996 U.S.C.A.N. 1143, 1172. This document
contains a temporary regulation that authorizes the disclosure of
tax returns and return information to a designee of the taxpayer
pursuant to a nonwritten request or consent when the taxpayer seeks
the assistance of a third party in resolving a tax matter.

This document also amends the existing regulation to clarify the
rules applicable to written requests or consents to disclosure. On
October 3, 1980, a final regulation (TD 7723) relating to the
disclosure of tax returns and return information to a person
designated by the taxpayer in a written request or consent were
published in the Federal Register (45 FR 65564). Since the
publication of this final regulation, the IRS and the Treasury
Department have determined that further guidance on written consent
requirements is necessary..

Explanation of Provisions

Nonwritten consents

Under the existing regulation, if a taxpayer wishes a third party to
assist in the resolution of a tax matter between the taxpayer and
the IRS, and the third party is not otherwise authorized to practice
before the Internal Revenue Service, a written section 6103(c)
request or consent must be executed by the taxpayer.

The temporary regulation authorizes the IRS to accept nonwritten
requests or consents authorizing the disclosure of tax returns and
return information to third parties assisting taxpayers in resolving
tax related matters. Thus, for example, the temporary regulation
clarifies that the taxpayer can orally consent to disclosures by the
IRS to a person accompanying the taxpayer to meetings or interviews
with the IRS, or participating in a telephone conversation with the
taxpayer. When the taxpayer is present, either physically or on the
telephone, the taxpayer will be able to knowingly and voluntarily
consent to the disclosure without the need for further expressing
that intent in writing.

Thus, the use of nonwritten consents will enable the IRS to improve
its customer service in that, with the assistance of their
designees, taxpayers will be able to resolve tax problems in a more
timely fashion, without the need for burdensome paperwork.
Additionally, nonwritten requests or consents will assist the IRS in
moving to a paperless environment by further facilitating the use of
electronic communication systems.

As with written requests or consents, before disclosing tax returns
and return information to a third party pursuant to a taxpayer's
nonwritten request or consent, the IRS will take reasonable steps to
confirm the identity of the taxpayer and the designee. For example,
IRS personnel, pursuant to existing procedures, verify that they are
speaking to the taxpayer prior to disclosing.4 return information to
that taxpayer.

Nonwritten requests for or consents to disclosure do not take the
place of a power of attorney authorizing a third party to represent
the taxpayer before the IRS. Practice before the IRS remains
governed by the regulations at 26 CFR 601.501 et seq. and Treasury
Department Circular 230 (31 CFR part 10). Acknowledgments of, and
Notices Regarding, Electronically Filed Returns The temporary
regulation also provides parameters for the development of consents
for the electronic filing program. The IRS currently provides an
acknowledgment to an electronic return originator (ERO) to indicate
that it has received information from the ERO in an acceptable form,
and that the taxpayer identity information, as defined by section
6103(b)(6), matches IRS records.

Alternatively, the IRS may notify the ERO that it has rejected the
ERO's electronic submission because the taxpayer identity
information does not match IRS records or, for example, because the
taxpayer is not responsible for the tax payment. The taxpayer may
also have authorized an electronic debit to pay a tax debt, and the
taxpayer may want the IRS to send an acknowledgment to the ERO that
the account has been properly debited, or to disclose information to
the taxpayer's financial institution to resolve a problem with the
electronic debit transaction. To ensure that the IRS is authorized
to disclose tax returns and return information to third parties in
an electronic system, the IRS must receive a valid request for or
consent to disclosure pursuant to section 6103(c). The current
system requires the taxpayer to execute a written consent on Form
8453 to permit these disclosures.

The temporary regulation authorizes an electronic consent to permit
the disclosures of the return information described above and such
other information as the IRS determines is necessary to the
operation of the electronic filing program. Such consent must inform
the taxpayer of the return information that. will be transmitted to
the ERO and other third parties as a result of the electronic filing
of the taxpayer's return or other information.

Combined FedState Filing Programs

The temporary regulation also reduces the burden on taxpayers in
combined Federal-State (FedState) return filing programs. If the
taxpayer files a single combined Federal and State tax return with
the IRS, the information contained in such FedState return that is
gathered with respect to a taxpayer's liability under both Federal
and State law, including the taxpayer's name, taxpayer
identification number, and adjusted gross income, is return
information protected by section 6103. If the IRS discloses such
return information to the State in satisfaction of the taxpayer's
State filing obligations, the information can be used by the State
only for State tax administration purposes under section 6103(d). On
the other hand, if a State tax return is filed directly with the
State, information on the State return is not subject to the
restrictions of section 6103(d) and can be used for appropriate non-
tax purposes permitted under State law.

In the current electronic FedState filing program, to avoid these
section 6103 restrictions, return preparers make two separate
electronic transmissions to the IRS--one for the Federal return and
one for the State return. The common items of data are sent twice,
once in the Federal "packet" and once in the State "packet." The
items of information in the State packet are not restricted by
section 6103 because they have not been filed with the IRS with
regard to Federal tax liability.

Alternatively, in the FedState telefile program, a consent has been
developed that permits the Internal Revenue Service to disclose
common data items to the State tax agency. The information received
by the State pursuant to the taxpayer's request or consent is
treated, for purposes of section 6103, as if.6 the State had
received the information directly from the taxpayer, and therefore
the information can be used for appropriate non-tax purposes under
State law. Under the existing regulation, consents for FedState
filing programs must comply with current §301.6103(c)-1(a). The
existing regulation requires, among other things, a separate written
consent document. The IRS and the Treasury Department believe a
taxpayer's voluntary participation in an optional FedState filing
program that provides the taxpayer with notice of the disclosures to
be made to the State as part of the program constitutes a sufficient
knowing and voluntary consent to permit disclosures to States in
this situation. To reduce the burden on taxpayers and improve the
efficiency of tax administration, the temporary regulation provides
that by filing a combined FedState return, the taxpayer consents to
the disclosure of the common data items to the State tax agency, and
that the information will be treated as if it had been received
directly by the State from the taxpayer. As noted above, the
temporary regulation requires a notice of the disclosures that are
to be made in the FedState filing program so that taxpayers may
choose to participate in such programs with knowledge of such
disclosures.

Other Changes

The temporary regulation also provides needed clarification in a
number of areas not specifically addressed under the existing
regulation. The temporary regulation provides rules for receipt of
section 6103(c) consents by entities other than the IRS. Certain
Treasury Department agencies, such as the Financial Management
Service, perform Federal tax administration functions and receive
tax information from the IRS. In addition, IRS contractors receive
tax information to provide tax administration services pursuant to
section 6103(n). The existing regulation provides only for receipt
of requests for or consents to disclosure by the IRS. The temporary
regulation permits Federal government agencies.

performing Federal tax administration functions to receive section
6103(c) consents and disclose returns and return information in the
possession of such agency to the taxpayer's designee. For example,
the temporary regulation clarifies that the Financial Management
Service can disclose return information related to the offset of the
taxpayer's tax refund to the designee of the taxpayer, such as in
response to a Congressional inquiry. The temporary regulation also
clarifies that receipt of a request or consent by an agent or
contractor of the IRS is the same as receipt by the IRS. However, an
agent or contractor of the IRS may make disclosures with the
taxpayer's consent only if such disclosures are specifically
authorized in the contract or otherwise specifically authorized in
writing by the IRS. §301.6103(n)-1(a).

The temporary regulation defines the term separate written document
to conform to current IRS practice. The temporary regulation also
specifies the Secretary of the Treasury's authority to provide for
methods of signing requests for or consents to disclosure. See
§301.6061-1(b).

The temporary regulation clarifies the requirements for identifying
the designee to whom disclosure is to be made when the disclosure
occurs in a public forum, such as a courtroom, a congressional
hearing, or in the media. In these circumstances, it may not be
possible to designate specifically every person to whom disclosure
is to be made. While identifying individual designees in a public
forum may not be practical, a taxpayer can knowingly and voluntarily
authorize disclosure in a public forum by specifically indicating
the circumstances surrounding the public disclosure, including, for
example, a description of the place, date, and time. The temporary
regulation also incorporates the longstanding IRS practice that
entities, such as corporations and State and local government
agencies, are appropriate designees.

The temporary regulation also affirms longstanding practices of the
IRS. regarding the authority to execute consents. Generally, persons
that may receive returns pursuant to section 6103(e), paragraphs (1)
through (5), may execute disclosure consents under section 6103(c).
However, a one percent shareholder of a corporation, who may receive
corporate returns pursuant to section 6103(e)(1)(D)(iii), may not
execute disclosure consents because the right of inspection is
personal to the shareholder, and such shareholder is not permitted
to redisclose such information. See Internal Revenue Code
§§6103(a)(3), 7213(a)(5). The temporary regulation also
provides that if the taxpayer is an entity, generally a person with
authority under State law to bind the entity may execute a section
6103(c) consent. Finally, the temporary regulation provides that the
holder of a taxpayer's power of attorney may not execute a
disclosure consent unless that authority is specifically granted in
the power.

Special Analyses

It has been determined that this Treasury decision is not a
significant regulatory action as defined in Executive Order 12866.
Therefore, a regulatory assessment is not required. This temporary
regulation provides taxpayers with enhanced procedures to resolve
problems with the IRS. For this reason, notice and public procedure
and a delayed effective date would be contrary to the public
interest pursuant to 5 U.S.C. 553(b)(B) and 553(d), respectively.
Because this notice of proposed rulemaking is required, the
provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.)
do not apply. Pursuant to section 7805(f) of the Internal Revenue
Code, this temporary regulation will be submitted to the Chief
Counsel for Advocacy of the Small Business Administration for
comment on its impact on small business.

Drafting Information

The principal author of this regulation is Jamie Bernstein, Office
of the. Associate Chief Counsel, Procedure and Administration
(Disclosure & Privacy Law Division). However, other personnel from
the IRS and Treasury Department participated in its development.

List of Subjects in 26 CFR Part 301

Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income
taxes, Penalties, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations Accordingly, 26 CFR part
301 is amended as follows:

PART 301--PROCEDURE AND ADMINISTRATION

Paragraph 1. The authority citation for part 301 is amended by
adding an entry in numerical order to read as follows:

Authority: 26 U.S.C. 7805 * * *

Section 301.6103(c)-1T also issued under 26 U.S.C. 6103(c). * * *
§301.6103(c)-1 [Removed ]

Par. 2. Section 301.6103(c)-1 is removed.

Par. 3. Section 301.6103(c)-1T is added to read as follows:
§301.6103(c)-1T Disclosure of returns and return information to
designee of taxpayer.

(a) Overview. Subject to such requirements and conditions as the
Secretary of the Treasury may prescribe by regulation, section
6103(c) of the Internal Revenue Code authorizes the Internal Revenue
Service to disclose a taxpayer's return or return information to
such person or persons as the taxpayer may designate in a request
for or consent to such disclosure, or to any other person at the
taxpayer's request to the extent necessary to comply with the
taxpayer's request to such other person for information or
assistance. This regulation contains the requirements that must be
met before, and the conditions under which, the Internal Revenue
Service may make such disclosures.

Paragraph (b) of this section provides the requirements that are
generally applicable to designate a third party to receive the
taxpayer's returns and return information. Paragraph (c) of this
section provides requirements under which the Internal Revenue
Service may disclose information in connection with a taxpayer's
written or nonwritten request for a third party to provide
information or assistance with regard to a tax matter, for example,
a Congressional inquiry. Paragraph (d) of this section provides the
parameters for disclosure consents connected with electronic return
filing programs and combined Federal State filing. Finally,
paragraph (e) provides definitions and general rules related to
requests for or consents to disclosure.

(b) Disclosure of returns and return information to person or
persons designated in a written request or consent--(1) General
requirements. Pursuant to section 6103(c) of the Internal Revenue
Code, the Internal Revenue Service (or an agent or contractor of the
Internal Revenue Service) may disclose a taxpayer's return or return
information to such person or persons as the taxpayer may designate
in a request for or consent to such disclosure. A request for or
consent to disclosure under this paragraph (b) must be in the form
of a separate written document pertaining solely to the authorized
disclosure. (For the meaning of separate written document, see
paragraph (e)(1) of this section.) The separate written document
must be signed (see paragraph (e)(2) of this section) and dated by
the taxpayer who filed the return or to whom the return information
relates. The taxpayer must also indicate in the written document--

(i) The taxpayer's taxpayer identity information described in
section 6103(b)(6);

(ii) The identity of the person or persons to whom the disclosure is
to be made;

(iii) The type of return (or specified portion of the return) or
return.11 information (and the particular data) that is to be
disclosed; and

(iv) The taxable year or years covered by the return or return
information.

(2) Requirement that request or consent be received within sixty
days of when signed and dated.The disclosure of a return or return
information authorized by a written request for or written consent
to the disclosure shall not be made unless the request or consent is
received by the Internal Revenue Service (or an agent or contractor
of the Internal Revenue Service) within 60 days following the date
upon which the request or consent was signed and dated by the
taxpayer.

(c) Disclosure of returns and return information to designee of
taxpayer to comply with a taxpayer's request for information or
assistance. Where a taxpayer makes a written or nonwritten request,
directly to another person or to the Internal Revenue Service, that
such other person (for example, a member of Congress, friend, or
relative of the taxpayer) provide information or assistance relating
to the taxpayer's return or to a transaction or other contact
between the taxpayer and the Internal Revenue Service, the Internal
Revenue Service (or an agent or contractor of the Internal Revenue
Service or a Federal government agency performing a Federal tax
administration function) may disclose returns or return information
to such other person under the circumstances set forth in paragraphs
(c) (1) through- (3) of this section.

(1) Written request for information or assistance.

(i) The taxpayer's request for information or assistance may be in
the form of a letter or other written document, which must be signed
(see paragraph (e)(2) of this section) and dated by the taxpayer.
The taxpayer must also indicate in the written request--

(A) The taxpayer's taxpayer identity information described in
section 6103(b)(6);.12

(B) The identity of the person or persons to whom disclosure is to
be made; and

(C) Sufficient facts underlying the request for information or
assistance to enable the Internal Revenue Service to determine the
nature and extent of the information or assistance requested and the
returns or return information to be disclosed in order to comply
with the taxpayer's request.

(ii) A person who receives a copy of a taxpayer's written request
for information or assistance but who is not the addressee of the
request, such as a member of Congress who is provided with a
courtesy copy of a taxpayer's letter to another member of Congress
or to the Internal Revenue Service, cannot receive returns or return
information under paragraph (c)(1) of this section.

(2) Nonwritten request or consent.

(i) A request for information or assistance may also be nonwritten.
Disclosure of returns and return information to a designee pursuant
to a taxpayer's nonwritten request will be made only after the
Internal Revenue Service has--

(A) Obtained from the taxpayer sufficient facts underlying the
request for information or assistance to enable the Internal Revenue
Service to determine the nature and extent of the information or
assistance requested and the return or return information to be
disclosed in order to comply with the taxpayer's request;

(B) Confirmed the identity of the taxpayer and the designee; and

(C) Confirmed the date, the nature, and the extent of the
information or assistance requested.

(ii) Examples of disclosures pursuant to nonwritten requests for
information or assistance under this paragraph (c)(2) include, but
are not limited to, disclosures to a friend, relative, or other
person whom the taxpayer brings to an interview or meeting with
Internal Revenue Service officials, or disclosures to. a person whom
the taxpayer wishes to involve in a telephone conversation with
Internal Revenue Service officials.

(3) Rules applicable to written and nonwritten requests for
information or assistance.A return or return information will be
disclosed to the taxpayer's designee as provided by this paragraph
only to the extent considered necessary by the Internal Revenue
Service to comply with the taxpayer's request or consent. Such
disclosures shall not be made unless the request or consent is
received by the Internal Revenue Service, its agent or contractor,
or a Federal government agency performing a Federal tax
administration function in connection with a request for advice or
assistance relating to such function. This paragraph (c) does not
apply to disclosures to a taxpayer's representative in connection
with practice before the Internal Revenue Service (as defined in
Treasury Department Circular No. 230). For disclosures in these
cases, see section 6103(e)(6) and §§601.501 through
601.508 of this chapter.

(d) Acknowledgments of electronically filed returns and other
documents; combined filing programs with State tax agencies--(1)
Acknowledgment of, and notices regarding, electronically filed
returns and other documents.When a taxpayer files returns or other
documents or information with the Internal Revenue Service
electronically, the taxpayer may consent to the disclosure of return
information to the transmitter or other third party, such as the
taxpayer's financial institution, necessary to acknowledge that the
electronic transmission was received and either accepted or rejected
by the Internal Revenue Service, the reason for any rejection, and
such other information as the Internal Revenue Service determines is
necessary to the operation of the electronic filing program. The
consent must inform the taxpayer of the return information that will
be transmitted and to whom disclosure will be made. The requirements
of paragraphs (b) and (c) of this section do not apply to a consent
under this. paragraph (d)(1).

(2) Combined return filing programs with State tax agencies.

(i) A taxpayer's participation in a combined return filing program
between the Internal Revenue Service and a State agency, body, or
commission (State agency) described in section 6103(d)(1)
constitutes a consent to the disclosure by the Internal Revenue
Service, to the State agency, of taxpayer identity information,
signature, and items of common data contained on such return. For
purposes of this paragraph, common data means information reflected
on the Federal return required by State law to be attached to or
included on the State return. Instructions accompanying the forms or
published procedures involved in such program must indicate that by
participating in the program, the taxpayer is consenting to the
Internal Revenue Service's disclosure to the State agency of the
taxpayer identity information, signature, and items of common data,
and that such information will be treated by the State agency as if
it had been directly filed with the State agency. Such instructions
or procedures must also describe any verification that takes place
before the taxpayer identity information, signature and common data
is transmitted by the Internal Revenue Service to the State agency.

(ii) No disclosures may be made under this paragraph (d)(2) unless
there are provisions of State law protecting the confidentiality of
such items of common data.

(e) Definitions and rules applicable to this section--(1) Separate
written document.

(i) For the purposes of paragraph (b) of this section, separate
written document means--

(A) One side of a standard (8 ½" by 11" or larger) sheet of
paper, which may be included as part of a larger document;

(B) Text appearing on a single computer screen containing all the.15
elements described in paragraph (b)(1) of this section, which can be
signed (see paragraph (e)(2) of this section) and dated by the
taxpayer, and which can be reproduced, if necessary; or

(C) A consent on the record in an administrative or judicial
proceeding, or a transcript of such proceeding recording such
consent, containing the information required under paragraph (b)(1)
of this section.

(ii) A provision included in a taxpayer's application for a loan or
other benefit authorizing the grantor of the loan or other benefit
to obtain any financial information, including returns or return
information, from any source as the grantor may request for purposes
of verifying information supplied on the application, does not meet
the requirements of paragraph (b)(1) of this section because the
provision is not a separate written document relating solely to the
disclosure of returns and return information. In addition, the
provision does not contain the other information specified in
paragraph (b)(1) of this section.

(2) Method of signing. A request for or consent to disclosure may be
signed by any method of signing the Secretary of the Treasury has
prescribed pursuant to §301.6061-1(b) in forms, instructions,
or other appropriate guidance.

(3) Permissible designees and public forums.Permissible designees
under this section include individuals; trusts; estates;
corporations; partnerships; Federal, State, local and foreign
government agencies or subunits of such agencies; or the general
public. When disclosures are to be made in a public forum, such as
in a courtroom or congressional hearing, the request for or consent
to disclosure must describe the circumstances surrounding the public
disclosure, e.g., congressional hearing, judicial proceeding, media,
and the date or dates of the disclosure.

(4) Authority to execute a request for or consent to disclosure.Any
person who may obtain returns under section 6103(e)(1) through (5),
except section. 6103(e)(1)(D)(iii), may execute a request for or
consent to disclose a return or return information to third parties.
For taxpayers that are legal entities, such as corporations and
municipal bond issuers, any officer of the entity with authority
under applicable State law to legally bind the entity may execute a
request for or consent to disclosure. A person described in section
6103(e)(6) (a taxpayer's representative or individual holding a
power of attorney) may not execute a request for or consent to
disclosure unless the designation of representation or power of
attorney specifically delegates such authority. A designee pursuant
to this section does not have authority to execute a request for or
consent to disclosure permitting the Internal Revenue Service to
disclose returns or return information to another person.

(5) No disclosure of return information if impairment. A disclosure
of return information shall not be made under this section if the
Internal Revenue Service determines that the disclosure would
seriously impair Federal tax administration (as defined in section
6103(b)(4) of the Internal Revenue Code).

(f) Effective date. This section is applicable on January 11, 2001
through January 10, 2004.

Robert E. Wenzel
Deputy Commissioner of Internal Revenue

Approved: December 29, 2000

Jonathan Talisman
Assistant Secretary of the Treasury

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